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More on sunsetting tax expenditures

I say again, this is a good idea that really needs to happen.

Sen. John Carona

The Texas tax code is rich with tax breaks. There are tax breaks for industries relocating to the state and for anyone with an Internet connection. Tax exemptions for groceries and bottled water. Tax holidays for back-to-school supplies. Tax exemptions for golf courses at private country clubs.

It adds up to at least $38 billion a year for the state’s major taxes and school property taxes, the comptroller estimates — hardly pocket change in a state that is expected to collect $80 billion in tax revenue in 2012-13. But no one claims to know for sure how much the state is forgoing because, by law, smaller taxes — those that raise $2.2 billion or less — are excluded from a biennial report by the state comptroller.

Sen. Rodney Ellis

“We have so many exceptions to the tax code, none of us really know how many we have, what they cost, if they make sense or they don’t,” said state Sen. Rodney Ellis, D-Houston.

To get a handle on all those tax breaks, Ellis, along with Dallas Republican state Sen. John Carona, has filed legislation to create a “sunset” process that would eliminate any tax break that isn’t renewed by the Legislature.

“I truly believe every conservative in this Capitol ought to be supportive of analyzing those special government giveaways on a regular basis,” Carona said. “And that’s all this bill seeks to accomplish.”

Just as the state now reviews every agency and its programs on a 12-year cycle, Ellis and Carona want every state and local “tax preference” reviewed on a six-year cycle. The comptroller would set the schedule, the Legislative Budget Board would present the facts, and the Legislature would be forced to reaffirm the tax break or it would die.

Both lawmakers expect that the Legislature would reaffirm most of the tax breaks, including the popular homestead exemption and exclusions for groceries, medical and dental services, and medicines, for example.

But a periodic exam invariably would raise questions. Should golf courses at private country clubs be appraised at less than 10 percent of the land’s market value? Should retailers be paid — some say overpaid — for remitting sales taxes on time? Is there still a need to encourage the spread of the Internet by exempting sales tax on the first $25 of your monthly bill?

Then there are the oddities of the sales tax. Soda is taxed; bottled water isn’t. The services of landscape architects aren’t taxed, but landscape services are. Food meant to be eaten at home is exempt, but not food intended for immediate consumption.

And so on and so forth. If it helps, think of these exemptions and exceptions and what have you as expenditures, because that really is what they are. Expenditures get plenty of scrutiny – too much, sometimes – unless they’re tucked into the tax code. We could have recouped about $2 billion from ending unnecessary tax expenditures back in 2011, but of course the Republicans weren’t interested in cutting that kind of spending. It would be nice if there were some more interest in it this time around. If nothing else, we’re almost certainly going to need to find some more money to comply with the latest school finance lawsuit ruling once the Supreme Court has reviewed it. This is a sensible place to start looking. See here for more.

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3 Comments

  1. Ross says:

    Only in the bizarre world of Progressive Land is taking less money from the citizenry an “expenditure”.

  2. It’s not “taking less money from the citizenry”, Ross, it’s charging a select and lucky few less for the same thing that others get charged for. Those of us who don’t get these exemptions pay more to pick up the slack. How does that make sense?

  3. Ross says:

    I didn’t say whether or not it makes sense, but it’s not an expenditure. Saying it is an expenditure implies the government is entitled to the money. I don’t think government should ever think it is entitled to any of our money. There are certain tasks best performed by government, and we need to pay for those, but never, ever, forget where that money comes from.

    The discussion we need to have is whether favoring certain taxpayers over others is fair, but we can do that without considering a reduction in taxes to be an expenditure.

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